Tightness in supply and higher prices will characterize the
andalusite market throughout 2018 - availability is set to
remain limited, forcing buyers to seek other sources of raw
materials.
With the broad balance between supply and demand in the
sector over the past few years giving way to a shortage in
2017, consumers are concerned about security of future
supply.
Heavy rains at the start of this year in South Africa, the
world’s largest producer, curtailed local output
and exacerbated shortness prompted by flooding issues in
Peru, the other main origin of the refractory mineral, in the
first quarter.
Production restarted and ramped up following the unfavorable
weather. Still, global output in 2017 is set to remain below
total demand. Several consumers and distributors speaking to
Industrial Minerals this year regularly
highlighted delays in consignments and lower volumes
shipped.
According to some market participants, the andalusite market
could be short by as much as 30,000 tonnes by the end of
2017. But other participants involved in the supply of the
mineral reckoned this estimate to be "too pessimistic."
Additionally, some believe a large proportion of the
shortage created this year will have a direct effect on 2018
availability because a large volume of those volumes that could
not be shipped this year will be deferred to next
year.
It is possible that some 2018 volumes will be needed to cover
2017 contractual agreements, some market participants
conceded. Others, however, added that this is likely only in
some cases because users would have to find immediate
replacement of material and may not be willing - or able - to
wait for deliveries to reach them several months later.
On the supply front, Imerys - the single largest producer of
andalusite, with operations in France and South Africa - has
been aiming to expand output to meet the additional
demand.
The miner told Industrial Minerals it has
been able to "produce 30% more andalusite compared to what
was produced in the first half of 2016." It upgraded the
flotation workshop at the Glomel site in France and brought
online a previously decommissioned crushing plant in
Thabazimbi, South Africa, as well as new equipment in
Annesley.
"There is a willingness to increase production on the part
of most producers," one distributor told Industrial
Minerals, adding that high demand makes for good
business prospects.
"But the weather issues can put a spanner in the works. If
it rains heavily during the wet season, as it did early this
year, the facilities are inaccessible. You can only do so much
to prevent that," he added.
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Andalusite is used for monolithic linings in the
steel industry,
particularly in blast and electric furnaces. It is also
used in
the glass industry and in cement kilns.
Bethlehem_BOF |
Shorter contracts
Amid the volatility that is affecting raw materials including
bauxite, alumina and magnesia, trading patterns in andalusite
are expected to change from 2018, giving way to shorter
contracts.
At the time of writing late in November, contracting
activity from suppliers and buyers of the mineral seem to
confirm this pattern.
Until now, andalusite selling was mostly settled through
year-long contracts. Due to the market shortage, suppliers
stated they cannot commit to price over 12 months; in many
cases, they have settled shorter contracts, mainly for six
months.
One seller told Industrial Minerals he has
closed deals mainly for the first half.
Another contractual option is to agree on volumes for
12-month supply but to fix the price only for the first half of
the year, leaving the possibility to review the price for the
second half.
Industrial Minerals is aware that some
volumes have been booked through this arrangement.
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Andalusite production worldwide
(tonne)*
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* Not including China, France production
Source USGS
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Prices on the up
The conditions in place could lead to higher andalusite
prices for 2018 material, according to sources.
Still, andalusite is not a market that displays the type of
volatility seen recently in, say, bauxite or magnesia. In that
sense, a doubling of the price in a matter of months - such as
was the case for Chinese DBM or European FM - seems unlikely
for now.
While market participants have been particularly cagey on
contractual offers for next year, most industry sources
predicted a price increase of around 10-15%. Some customers
that buy large volumes said they are confident of achieving a
lower increase of around 5-10%.
"All my selling prices are increasing, depending on the
existing ones: those who had a lower price may see a higher
increase, while for those who were already paying a high
price, the increase may be small," one supplier said.
Other factors that are bound to affect delivered prices are
exchange rates and freight costs.
Industrial Minerals’ 2017 contract prices of
andalusite, min 57% Al2O3, stood at €240-290 ($282-341)
per tonne fob South Africa and at €355-425 per tonne cif
Europe.
Andalusite in brief
Andalusite, kyanite and sillimanite are aluminosilicate
minerals, with high Al2O3 content varying from 63% (high-grade)
to less than 40% (low-grade), and silica content of about
37%.
The minerals have the same chemical composition, but differ
in their structure and physical properties.
Under heating, all three minerals transform to make mullite,
an ideal refractory material, which contains as much as 72%
Al2O3 and melts at 1,850°C.
Mullite is made of needle-like crystals, which gives the
material high load-bearing capacity at elevated
temperatures.
Andalusite converts to mullite when heated at temperatures
between 1,300°C and 1,550°C. It is the best source of
mullite because its unique microstructure traps the liquid
silica released in the process called mullitisation.